Bulletinof the European Communities

Supplement 6/93

Growth , competitiveness,employmentThe challenges and ways forwardinto the 21st century

White Paper

COM(93) 7005 December 1993

Parts A and B

Blank pages not reproduced: 4 , 6 , 8 , 36 , 38 , 54 , 56 , 116 , and 144

COMMISSION OF THE EUROPEAN COMMUNITIES

Cataloguing data can be found at the end of this publication

Luxembourg: Office for Official Publications of the European Communities , 1993

ISBN 92-826-7000-7 (Parts A + B)ISBN 92-826-7071-6 (Part C)

ISBN 92-826-7065-1 (Both volumes)

(9 ECSC-EEC-EAEC, Brussels. Luxembourg, 1993

Reproduction is authorized, except for commercial purposes , provided the source isacknowledged

Printed in Germany

PREAMBLE

This White Paper sets out to foster debate and to assist decision-making at decentralizednational or Community level - so as to lay the foundations for sustainable development ofthe European economies, thereby enabling them to withstand international competition whilecreating the millions of jobs that are needed.

We are convinced that the European economies have a future. Looking at the traditionalbases of prosperity and competitiveness, Europe has preserved its chances. It possesses assetswhich it has only to exploit ~ assets such as its abundant non-physical capital (educationskills, capacity for innovation, traditions), the availability of fmancial capital and highly ef-ficient banking institutions, the soundness of its social model, and the virtues of cooperationbetween the two sides of industry.

Given the scale of the needs that have to be met, both in the European Union and elsewherein the world, recovery must be achieved by developing work and employment and not byendorsing basically Malthusian solutions. Yes, we can create jobs, and we must do .so if wewant to safeguard the future - the future of our children, who must be able to fmd hope andmotivation in the prospect of participating in economic and social activity and of beinginvolved in the society in which they live, and the future of our social protection systemswhich are threatened in the short term by inadequate growth and in the long term by the dete-rioration in the ratio of the people in jobs to those not in employment.

In other words, we are faced with the immense responsibility, while remaining faithful to theideals which have come to characterize and represent Europe, of eroding a new synthesis ofthe aims pursued by society (work as a factor of social integration, equality of opportunity)and the requirements of the economy (competitiveness and job creation).

This major challenge confronts us all. That is why we are arguing, first and foremost, the needto press on with building a unified Europe which will increase our strength through cooper-ation and through the benefits of a large area without frontiers of any kind. That is why weare calling on everyone - and not only political decision-makers and business leaders - tocontribute to the combined effort by seeking to understand the new world and by partici.pating in the joint endeavour.

Nothing would be more dangerous than for Europe to maintain structures and customs whichfoster resignation, refusal of commitment and passivity. Revival requires a society driven bycitizens who are aware of their own responsibilites and imbued with a spirit of solidaritytowards those with whom they form local and national communities ~ communities that areso rich in history and in their common feeling of belonging.

The contribution which the European Union can make is therefore to assist this movement~hich reconc~les our historical loyalties with our wish to take our place in this new world thatIS now emergmg.

PART A

PART B

Growth

Chapter I

SUMMARY

White Paper: The challenges and ways forward into the 2lstcentury

......................................................................................................

The conditions of growth competitiveness and more jobs(preparatory work)

..................................................................................

The macroeconomic framework

............................................................

Chapter 2

n - Competitiveness

Chapter 3

Chapter 4

Chapter 5

Chapter 6

The conditions for growth and greater competitiveness

......................

A - Towards global competitiveness

...................................................

B - Making the most of the internal market

.....,.................................

Trans-European networks

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Research and technological development

.............................................

The changing society, the new technologies ........"................................

A - The information society.................................................................

B ~ Biotechnology and its diffusion

.....................................................

C - The audiovisual sector

...................................................................

The Community, an open and reliable partner

.........".........................

m - Employment

Chapter 7 Adaptation of education and vocational training systems

...................

Chapter 8

Chapter 9

Turning growth into jobs

........................................................................

Statutory charges on labour

....................................................................

IV - Towards a new development model

Chapter IO

PART C

Thoughts on a new development model for the Community .......".....

The contributions of the Member States (separate volume)

IOO

103

106

117

123

136

145

PART A

White PaperThe challenges and ways forward

into the 21st century

Why this White Paper?

The one and only reason is unemployment.We are aware of its scale, and of its conse-quences too. The difficult thing, as experi-ence has taught us, is knowing how totackle it.

The Copenhagen European Council inJune invited the European Commission topresent a White Paper on a medium-termstrategy for growth, competitiveness andemployment. That decision followed anin-depth discussion between the Heads ofState or Government based on an analysisby the President of the Commission of theweaknesses of the European economies.

The White Paper draws in large part on thecontributions from the Member States. Ithas also been guided by the discussions often beset by conflict

- under way in ourcountries between governments and socialpartners (employers' and trade unionorganizations).The European Commission is aware of thedifficulty of the task. For if the solutionsalready existed, our countries would surelyhave applied them; if there were a miraclecure, it would not have gone unnoticed.With national situations being so different,any proposal has to be presented with sensi-tivity and caution. That being so, the Com-mission does share the view, expressed bymany Member States, that joint responseswould strengthen the hand of each playerand therefore of the European Union.

There is no miracle cureNeither protectiomsm, which would besuicidal for the European Union, theworld' largest trading power, andwould run counter to its proclaimedobjectives, in particular that of encoura-ging the economies of the poorestcoun-tries to take off;

. nor a dash for economic freedom: turningon the tap of government spending andcreating money can, like a narcotic, pro-duce a short-lived illusion of well-being.But the return to reality would be all themore painful when we had to repair the

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damage wreaked by inflation andexternal imbalances. The worst damagewould be higher unemployment;

. nor a generalized reduction in workinghours and job-sharing at national level:this would result in a slowing-down ofproduction due to the difficulty ofstriking the right balances between thedemand for skilled workers theoptimum utilization of plant and thesupply of labour;

. nOr a drastic cut in wages to align ourcosts on those of our competitors in thedeveloping countries: socially unaccept-able and politically untenable, such anapproach would only worsen the crisisby depressing domestic demand, whichalso contributes to growth and the main-tenance of employment.

How has it come to this?We will not dwell here on the analysis pre-sented in Copenhagen. This has been con-firmed and fleshed out by the national con-tributions and the Commission s research:competitiveness, growth and employmentare closely interrelated

, .

and have been forsome time.

Over the last 20 years. the European economy s potential

rate of growth has shrunk (fromaround 4% to around 2.5% a year);

. unemployment has been steadilyrising from cycle to cycle;

. the investment ratio has fallen byfive percentage points;

. our competitive position in relationto the USA and Japan has worsenedas regards:employmentour shares of export marketsR&D and innovation and its incor-poration into goods brought to themarketthe development of new products.

And yet the Community over the past fewyears enjoyed what all observers agree was

period of growth and restructuringprompted by the 1992 objective. That objec-tive was not an illusion: it swiftly receivedbroad support from all sections of society,and the structural changes it generatedaccount for many of the nine million jobscreated between 1986 and 1990.

The 1992 objective: A tangiblereality. 70 million customs documents done

away with;. A 3% saving on the costs of interna-

tional transport;. Three times more company mergers

and acquisitions in the Communityover the period in question;

. Twice the number of Europeancompanies involved in mergers andacquisitions in the rest of the world;

. A doubling of trade in the Com-munity in sectors previouslyregarded as sheltered from competi-tion;Investment up by one third between1985 and 1990;

. Nine million jobs created between1986 and 1990;

. One half of a percentage point extragrowth each year.

This integration process is not yet completesince certain sectors are being only grad-ually opened up to competition; it doeshowever, amply demonstrate that Europehas been capable of anticipating develop-ments, creating a stimulus and respondingto it.

How, then, can we explain the fact that allthese achievements have not made itpossible at least to cushion the effects of theworld recession? Was the single marketprocess merely a flash in the pan? The truthis that although we have changed, the rest ofthe world has changed even faster.

The present crisis can be understood onlyin the light of the universality of the trends

which have been shaping the globaleconomy and their acceleration since theend of the 1970s.

Changes in the decorIn geopolitical terms. new competitors have emerged and

have shown their ability to incor.porate the latest technical progress;

. the end of communism has openedup new potential for economicgrowth: 120 million people in neigh-bouring countries with a standard ofliving well below our own. But wehave not been able to harness thisfor a new dynamism;

In demographic terms. the ageing of the population and the

transformation of family structures;In technological terms. the new industrial revolution is well

under way and is causing rapid andfar-reaching changes in technologiesjobs and skills;

. the economy is becoming increas-ingly knowledge-based, manufac-turing activities are being farmedout, services are taking the lionshare, and the possession and trans-mission of information is becomingcrucial to success;

In financial terms. the interdependence of markets

resulting from the freedom of capitalmovements together with new tech-nology is an inescapable fact of lifefor all economic and financial oper-ators

The heart of the problem: Thethree types of unemploymentSince the beginning of the I 970s, unem-ployment in the Community has risensteadily except during the second half of the1980s. Today 17 million people are out ofwork. Over the last 20 years, 80% morewealth has been created but total employ-

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ment has risen by only 9%. To explain thisa distinction must be drawn between thethree different forms of unemployment:

Cyclical unemploymentIn a context in which labour resources areincreasing by some 0.50% a year, any slack-ening in growth immediately triggers asharp rise in unemployment. This is particu-larly so at present when, for the first timesince 1975, Europe has experienced a slow.down in economic activity.

Structural unemploymentAt the end of the 1980s, when the economywas going strong, unemployment still stoodat 12 million.

The explanations for this rigidity of unem-ployment are now clear:. The role we have come to play in the

new international division of labour hasnot been an optimum one because wehave neglected future growth sectors inconcentrating too much on the rents andpositions established in traditional indus.tries.

. The relatively high cost of unskilledlabour is speeding up the rationalizationof investment and holding back job cre-ation in services. This has resulted in theloss of millions of jobs.

. Our employment systems have aged: bythis term we mean the whole complex ofissues made up nowadays by the labourmarket and employment policy, thepossibilities of flexibility within or out-side enterprises, the opportunities pro-vided or not provided by the educationand training systems, and social protec-tion.Finally and more especially, the coun-tries of the south are stirring and com-peting with us - even on our own mar-kets at cost levels which we simplycannot match.

Technological unemploymentThis problem is as old as industrial societyitself, which has continually changed ~albeit not always smoothly - by incorpor-ating technical progress. Nevertheless, the

phenomenon now seems to be undergoing

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a change of scale. This is not to say thattechnological progress in enterprises isdoing away with more jobs than it is crea-ting: for example, the employment situationis on average more favourable in thosefirms that have introduced microelectronicsthan in those that have not done so.

It is nevertheless the case that we are onceagain passing through a period in which agap is opening up between the speed oftechnical progress, which is concerned pri-marily with how to produce (manufacturingprocesses and work organization) andwhich therefore often destroys jobs, andour capacity to think up new individual orcollective needs which would provide newjob opportunities.

And yet technical progress is presentingopportunities for growth and employmenton condition that we alter our developmentmodel, meet the needs stemming from theupheavals in social life and urban civiliza-tion, preserve our rural areas, and improvethe .environment and the quality of ournatural assets. In so doing, we will pave theways for our entry into the 2lst century.

Ways forward into the21 st centuryIn order to reverse the disastrous coursewhich our societies, bedevilled by unem-ployment, are taking, the European Unionshould set itself the target of creating 15million jobs by the end of the century.It is the economy which can provide thenecessary pointers to .a reappraisal of prin-ciples inherited from an age in which man-power resources were scarce, technologicalinnovation was made possible through imi-tation, and natural resources could beexploited at will. We are thus setting out anumber of broad guidelines which have apredominantly economic basis, although itwill be seen that they cannot be dissociatedfrom the major trends which are affectingsociety itself: an economy that is healthy,open, decentralized, competitive and basedon solidarity. However, these .efforts wouldbe in vain if we did not once again makeemployment policy the centre-piece of ouroverall strategy.

healthy economyThe people of Europe need stability. Thefalse prophets of inflation and of a return toexchange-rate variability represent specialinterests. Their bad money still threatens tooust the good.The White Paper is, accordingly, consistentwith the guidelines submitted to the Euro-pean Council, in accordance with the newTreaty (Article 103), to mark the beginningof the second stage of European economicunion, which must be successful if a singlecurrency is to be achieved. We must there-fore place our thinking within amacroecon-omic reference framework for both econ-omic and monetary convergence which willincrease the opportunities available to oureconomies.

This strategy could be applied in twophases, the first consisting of pulling out ofthe current recession as quickly as possibleand the second from the roid- 1990s con-sisting of returning to a path of strong andhealthy growth. The macroeconomicpolicies to be implemented for these twophases are set on similar courses but havedifferent points of emphasis.The gradual reduction in public deficitsdominates the initial phase, subsequentlygiving way to their stabilization around thecommon objective. This will call forincreased efforts to restructure spending and in particular to curb operating expendi-ture in favour of public resources allo-cated to investment.

Stable monetary policies consistent with theaim of low inflation will be a constantbenchmark throughout the period. They

, would lead to further interest-rate cuts thatwould make more attractive the investmentessential to the modernization and competi-tiveness of our economies. Investment ininfrastructures, housing and environmentalimprovement projects would thus be givena particular boost.

Finally, the trends of all categories of incomeshould be made consistent with the objec-tives of monetary stability and cost moder-ation. During the flfSt phase, the task wouldbe to avert an acceleration which wouldfrustrate the reduction of interest rates inthe long term; during the second, it would

be necessary to guarantee an adequate rateof return to permit an increase in the invest-ment ratio and hence in growth.

Growth Path compared(average % change per year)

Percent

1961 1973 1974-1980 1991-1995 1996-1989_GDP DLabour productivity E!!iEmployment

1995-2000Growth Path

An open economyEach of the major bursts of growth in theEuropean economies started with a qualita-tive leap in international trade. The mostspectacular contribution probably camefrom the establishment of the multilateraltrading system resulting from the BrettonWoods agreements after the Second WorldWar.Today we are perhaps seeing the beginningsof an equally important leap forward withthe very rapid integration into world tradeof developing countries and former com-munist countries.

Where is the Growth?(Percentage of world output)

1988-1990 1989-2000

75,

(_GECD DDeveloping countries_Others)

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The Community must be open and prepareitself for this prospect. This is why the con.elusion of the Uruguay Round negotiationsis of such importance for it too. For the firsttime, these negotiations will produce aglobal agreement between industrializedand developing countries containing bal-anced concessions aimed at fair access toall markets.

Among the issues in these negotiations, thetransformation of GAIT into a fullyfledged international institution designated amultilateral trade organization' would guar-antee a sustainable and harmonious develop-ment of international trade. The Communityis attached to this idea: it regards it as themeans of ensuring that GATI has the auth-ority to stand up to hegemony, to face upmore effectively to the imbalances resultingfrom world monetary instability, and toaddress other issues where the existence ofmultilateral rules would be invaluable.There is indeed a need to ensure better con-sistency between the various bodies respon-sible for fostering healthy competition, todeal with the inequality of the conditionsfor direct investment, and to guarantee a fairsharing-out of burdens in the area ofenvironmental protection.The strengthening of the multilateraltrading system, its effective application andthe transparency of its rules are, for theCommunity, the best guarantee of successwith its own effort to adjust. This is partand parcel of the goal of achieving coherentworld management of the problems posedby development inequalities and the con-centration of poverty in certain regions.The European Union must first demon-s~ate this openness of mind and recogni-tIon of the unavoidable globalization of theeconomy to its eastern and southern neigh-bourn. Enormous potential exists, but itrequires us to invest massively, to transfer aconsiderable volume of know-how and toopen up our markets more widely. If all ofthese countries manage to pursue reason-able policies of adjustment and moderniza-tion, they will fully benefit from our actionand return those benefits to us in the formof new markets and, consequently, newjobs. Only properly managed interdepend-ence can guarantee a positive outcome foreverybody.

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Decentralized economyThe market economy has a decentralizingeffect. This was the reasoning behind thesingle market' project (Objective 92). Itsaim was not only to achieve economies ofscale but also to set free the dynamism andthe creativity inherent in competition.Decentralization now also reflects a radicalchange in the organization of our societieswhich are all confronted with the growingcomplexity of economic and social phe-nomena and the legislative or regulatoryframework.Hence the growing importance of the locallevel at which all the ingredients of politicalaction blend together most successfully.

The information society. The dawning of a multimedia world

(sound text image) representsa radical change comparable withthe first industrial revolution;

. Tomorrow s world is already withus: by the end of the century therewill be 10 times as many TV chan-nels and three times the number ofsubscribers to cable networks. In theUSA it is estimated that six millionpeople are already involved in te1e-working;

. The USA has already taken the lead:200 of its biggest companies alreadyuse information highways;

. At the heart of the developmentmodel for the 2lst century, this issueis a crucial aspect in the survival ordeeline of Europe;It can provide an answer to the newneeds of European societies: com-munication networks within com-p~nies; widespread teleworking;wIdespread access to scientific andleisure databases; development ofpreventive health care and homemedicine for the elderly.

Hence also the decentralization movementaffecting the business world. SMEs are

often cited as models because they embodyoperational flexibility and a capacity forintegration which the units which make upthe big companies are now trying to imitate.Hierarchical and linear empires are grad-ually giving way to interactive organiz-ations.

This movement towards decentralizationsupported by the new technologies, istaking us towards a veritable informationsociety. The corollary to decentralization isinformation sharing and communication.

The European dimension would give theinformation society the best possiblechances of taking off. The Commission istherefore proposing, in the context of apartnership between the public sector andthe private sector, to accelerate the estab-lishment of 'information highways' (broad-band networks) and develop the corre-sponding services and applications (seeDevelopment theme I).

A more competitive economy

Drawing maximum benefit from thesingle marketWhile industrial policy continues to be con-troversial no one is in any doubt as to theresponsibility of governments and of theCommunity to create as favourable anenvironment as possible for company com-petitiveness. The single market is now aliving reality. However, where companiesare concerned, progress is needed in threeareas.

The first concerns the body of rules (lawsregulations, standards certification pro-cesses) which assure the smooth functioningof the market. The rules have to be sup-plemented in line with the initial target(whether they concern pharmaceuticalsintellectual property or company law, forexample). But, above all, how it thendevelops has to be guaranteed against therisk of inconsistency between national andCommunity laws. This means fresh cooper-ation between governments at the legislativedrafting stage. Likewise, care should betaken to ensure that the Community legisla-tion affecting companies is consistentespecially the environmental legislation.

The second condition revolves aroundsmall and medium-sized enterprises. Whilethey are a model of flexibility for big com-panies, they are also increasingly a factor ofcompetitiveness as a result of ' farming-out'and subcontracting. Hence the measurestaken on the initiative of big companies togalvanize their suppliers and clients. How-ever, the 'demography' of SMEs , i.e. theirbirth

, growth and regeneration, is also amatter of national policy. In some countriesit will be necessary to adapt their tax sys-tems, rights of succession and access toequity and to simplify intercompany creditregulations and practices. While most of thework has to be done at national level, theCommunity, for its part, must help to fitSMEs into the dynamics of the singlemarket. The immediate task, therefore, is towork towards simplification and informa-tion. A Community initiative will shortly beproposed in this connection.

The third condition concerns the accel-erated establishment of trans-Europeaninfrastructure networks (see DevelopmentTheme II).

The trans-European infrastructureWhy?. Faster, safer travel at lower cost;

Effective planning in Europe;. Bridge-building towards Eastern

Europe.

How?

. Remove regulatory and financialobstacles,

. Get private investors involved inprojects of European interest(applying the provisions of theTreaty, 'declaration of Europeaninterest');Identify projects on the basis of themaster plans adopted (transport) orin preparation (energy).

In order to establish these networks, pro-mote the information society, and developnew environmental improvement projects

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the Commission proposes to accelerate theadministrative procedures, act as a catalystand use the existing cooperation instru-ments. This represents an investment pro-gramme of ECU 20 billion per annum from1994 to 1999 (see Annex).

Stepping up the research effort andcooperationWithout eschewing competition, the abilityto cooperate and share risks is increasinglybecoming a sign of creativity. Our laws, ourtax systems and our programmes have to beadapted as a result, both at national and atEuropean level. Community competitionpolicy has thus made broad allowance forthese new forms of intercornpany cooper-ation.Encouraging intercompany cooperationwill gradually become a basic principle andnot just one 'aspect' of Community researchand development policy. This principle willhelp to identify major priorities and to pro-mote meetings between the operatorsinvolved. The Commission will proposethat Member States implement this newform of 'vertical cooperation' on the basisof a restricted number of large joint projectsgeared to the following:. New information technologies, the

importance of which has already beenemphasized.Biotechnology, where the early use ofresearch resources will make for greatersynergy between chemical companiesand the big potential users in the healthand agrl-foodstuffs sectors.EcotechnoIogies, meaning radical inno-vations targeting the causes of pollutionand aiming at environmental efficiencythroughout the production cycle. Eco-technologies will soon provide a majorcompetitive advantage.

An economy characterized bysolidarityThese options show how the dynamism ofthe market can help boost growth.Experience has also shown, however, thatthe market is not without its failings. ittends to underestimate what is at stake in

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the long term, the speed of the changes itcreates affects the different social categoriesunequally, and it spontaneously promotesconcentration, thereby creating inequalitybetween the regions and the towns. A ware-ness of these insufficiencies has led ourcountries to develop collective solidaritymechaJrlsms. At Community level the SingleEuropean Act has helped to restore the bal-ance in the development of the singlemarket by way of joint flanking policies aspart of economic and social cohesion.However, the social welfare system is nowbeing re-examined in many Member Statesto reduce costs through greater responsi-bility. The new model of European societycalls for less passive and more active soli-darity.Solidarity, first of all, between those whohave jobs and those who do not. This keyconcept has not figured at all in the collec-tive discussions and negotiations of the last10 years. That is why we are proposing asort of European social pact, the principleof which is quite simple but whose detailedarrangements would be adapted to thespe-cific circumstances of each country andeach business; in the spirit of a decen-tralized economy and of subsidiarity, newgains in productivity would essentially beapplied to forward-looking investments andto the creation of jobs.Solidarity also between generations, with aneye to the repercussions of a demographictrend which will see falling numbers of per-sons of adult working age. It is absolutelyessential that all decisions taken today takeaccount of this demographic dimension.That is why we must not only tackle unem.ployment, which is jeopardizing all oursocial security systems, but also expandand not reduce, the volume of work whichgenerates wealth and so finances solidarity.Solidarity, once again, between the moreprosperous regions and the poor struggling regions. Hence the conformationof economic and social cohesion as .anessential pillar of European construction.Solidarity, lastly and most importantly, inthe fight against social exclusion. If onlyone proof were needed that our economieshave not yet reached maturity and thatthere are still needs to be met it would be

the existence in Europe of some 40 roillionpeople below the poverty line. This is amatter for the Member States, but it is alsothe business of each citizen to practiceneighbourly solidarity' .. We need a compre-hensive policy, preventive as well as reme.dial, to combat the poverty which sodegrades men and women and splits societyin two. The areas of action are familiar:renovation of stricken urban areas, con-struction of subsidized housing, adaptationof education systems with extra resourcesfor children from disadvantaged back-grounds, and an active employment policywhich attaches high priority to the searchfor an activity or training accessible toeveryone rather than the registration of andpayment to the unemployed, even thoughin the last resort, this is still essential whereall other means of social reinsertion seemfor the moment, to be exhausted.

Action on jobs

As we have seen, the Community has failedto match the substantial increase in gener-ated wealth with parallel improvements injob opportunities. Looked at more closely,however, the performances of individualStates differ quite considerably. Forinstance, Germany and Spain have enjoyeda comparable rate of growth over the last 15years of around 2.3%, yet their averagelevels of unemployment are 6 and 16%respectively. Over the same period, mean-while, the United Kingdom, France, Bel-gium and Italy have all had an unemploy-ment rate of around 9% of the active popu-lation, but with growth rates ranging from1.8 to 2.5% on average. These disparities tellus a lot.

In a general manner, they show that growthis not in itself the solution to unemploy-ment, that vigorous action is needed tocreate jobs. However, such action must takeaccount of national circumstances. Morespecifically, the inflexibility of the labourmarket, which is responsible for a large partof Europe s structural unemployment, canbe traced back to specific institutional, legaland contractual circumstances in eachcountry. The educational system, labourlaws, work contracts, contractual negotiationsystems and the social security system formthe pillars of the various 'national employ-

ment systems' and combine to give each ofthem a distinctive appearance. In each casethe entire system must be mobilized toimprove the functioning of the labourmarket. This goes to show, once again, thatthere is no miracle solution; nothing shortof coordinated action by the various playersresponsible for the components of these sys-tems can effect the necessary transforma-tion.

Moreover, in each country the methods ofsocial dialogue will reflect national tradi-tions.

Priorities for action on jobslifelong education and training;

. greater flexibility in businesses, bothinternally and externally;

greater expectations fromdecentral-ization and initiative;

. reduction in the relative cost of low-qualified work;

. thorough overhaul of employmentpolicies;efforts to meet new needs.

Investment in education and training:Knowledge and know-howthroughout lifeOur countries' education systems are facedwith major difficulties, and not only of abudgetary nature. These problems arerooted in social ills: the breakdown of thefamily and the demotivation bred by unem-ployment. They also reflect a change in thevery nature of what is being taught. Prepa.ration for life in tomorrow s world cannotbe satisfied by a once-and-for-all acquisi-tion of knowledge and know-how. Every bitas essential is the ability to learn, to com-municate, to work in a group and to assessone s own situation. On the other hand, iftomorrow s trades require the ability tomake diagnoses and propose improvementsat all levels, the autonomy, independence ofspirit and analytical ability which come ofknowledge will once again be indispens-able.

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Lifelong education is therefore the overallobjective to which the national educationalcommunities can make their own contribu-tions. Difficult choices will have to made between increasing universitycapacity or quality, between higher educa-tion and vocational paths. However, eachcountry should be aiming towards univer-sally accessible advanced vocational training.As is shown by the Member States' contri-butions, principles and methods of fin-ancing may differ. In some cases, theemphasis is on equal opportunities for allindividuals and the proposed response isthe provision of training capital or chequesfinanced by the redistribution of publicresources. In other cases, advanced voca-tional training is linked to businesses and socontractual mechanisms will be proposedfor training investment or for co-investmentwith the participation of wage-earners. Inany event, public and private efforts mustbe married to create the basis in eachMember State for a genuine right to initialor ongoing training throughout one s life-time. This should be a key area of socialdialogue at European level.

The need for double flexibility both internal and external labour marketsGenerally speaking, the flexibility of thelabour market has deteriorated under theeffects of an accretion of partial measuresdesigned to reduce registered unemploy-ment. All of these measures now need to bere-examined by all the players with a viewto removing obstacles to employment.The question of labour flexibility needs tobe examined from two angles: that of theexternal labour market, where supply meetsdemand, and that of the market internal toeach business, i.e. the human resources at itsdisposal which it adjusts according to itsneeds.Improving external flexibility meansmaking it possible for more unemployedpersons to meet the identified requirementsof businesses. The first step here is toimprove geographical mobility. This couldbe encouraged by injecting new impetusinto the accommodation market and, inparticular, by removing obstacles to theconstruction of rented accommodation.

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The provision of a framework for exer-cising the right to advanced vocationaltraining has already been mentioned. Thisis a major pillar of flexibility, which alsocalls for initiatives, sometimes radical, fromthe two sides of industry in cooperationwith the public authorities:. In certain countries of the north of

Europe the campaign against undeclaredwork involves reducing certain unem-ployment benefits and cutting direct tax-ation on low incomes. However, unem-ployment benefits can only be reducedso far before the poverty line is reached.These limits have already been reachedin several countries;

. In several southern countries, the lawson the conditions under which workerson unlimited contracts may be laid offneed to be made more flexible, withgreater assistance being given to theunemployed and with less recourse toprecarious forms of employment;

. In many countries, in both north andsouth, labour compartmentalization detrimental both to the mobility of theactive population and to the retrainingof the unemployed. Bridging accessneeds to be established through collec-tive negotiation.

Internal flexibility is the result of optimummanagement of a company s humanresources. The aim is to adjust the work-force without making people redundantwherever this can be avoided. Focusing onthe continuity of the link between the com-pany and the worker, it maximizes theinvestment in human resources and staffinvolvement. It is up to individual com-panies to improve internal flexibility bymeans of staff versatility, the integratedorganization of work flexible workinghours, and performance-related pay. Tai.lored to the European company model, itshould be central to negotiations within thecompany.

The virtues of decentralization andinitiativeThe optimum operation of the labourmarket calls for a large degree of decentral-ization within 'employment areas . In

return, the national authorities should focuson the quality of training and the homo.geneity of qualifications. The successfulexperience of several Member States showsthe importance of effective participation ofthe social partners in the decentralizedmanagement of employment areas.Likewise, it is only by decentralizedapproach, i.e. at company level, that adjust-ments to working hours can lead toimproved competitiveness, and therebyencourage job creation and job retention.

Thus we can see how at Volkswagenimaginative negotiations based on a four-day week have led to a sensible, sociallyresponsible form of part-time working.More flexible retirement schemes, morediversified working years, and greater pro-vision for part-time working correspond inmany situations to the wishes of salariedstaff and the interest of undertakings whichare concerned to make better use of theircapital. Very often, such 'downward'adjustments in working hours are blockedby inflexible practices which standardizethe working week 'in Europe at between 37and 39 hours. To remove these obstacles, itis necessary, on the basis of the specific pro-visions of each country, to review labourlegislation (role of legislation on workinghours) and contractual practices (overtimepay), and in many cases simplify the way inwhich pension rights are calculated.

Reducing the cost of unskilled andsemi-skilled labourIn eight out of the twelve countries of theEuropean Union, social security contribu-tions are relatively more onerous on lowincomes. These countries suffer the mostfrom what is one of the most severe struc-tural causes of unemployment and unde-clared employment in the Community.Studies have been carried out in severalcountries with very high levels of securitycontributions. These studies show that areduction of 30 to 40% in social securitycontributions for low-paid workers wouldincrease employment by 2%. In other coun-tries, the possibility of replacing existingforms of income guarantee payments with asystem of negative tax deserves close atten-tion.

For all countries of the Union, it is essentialto reduce the cost of unskilled and semi-skilled labour by an amount equivalent to Ior 2 points of GNP by the year 2000. Theimprovement in tax revenue resulting fromthis measure would offset the cost by up to30%. The remainder should be fmanced bysavings or other revenue. Irrespective of itsintrinsic merits, the CO2/energy tax pro.posed by the Commission is one of the bestways of offsetting reductions in the cost ofemployment. Homogeneous taxation atsource of investment income as proposedby the Commission since 1989 would beanother possibility.

A full-scale overhaul of employmentpolicy

Investing in human resources is not the taskof business alone. It is also the task of gov-ernment. It is no longer possible to leavemasses of unemployed people in Europeunoccupied. Such is, however, the structureof government spending on unemploy-ment: roughly two thirds of public expendi-ture on the unemployed goes on assistanceand the remainder on 'active measures

Employers ' Social Contributions(Comparison at different wage levels)

50 %of_,o

(. ","avomgew"."',,=, E"",p"'. c.mmiO"..

D3xavom,o_,o

A complete reversal of attitude is requiredthe aim being to prevent long-term unem.ployment. On the one hand, the unem.ployed should be offered, according to howlong they have been unemployed, firsttraining leading to meaningful qualifica-tions, then the possibility of working, poss-

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ibly in the public sector, for a number ofmonths. In exchange, unemployed peoplewho are thus given real assistance inreturning to employment would make apersonal investment in this training andemployment. This, too, is a question of social dialogue in which the unemployedshould themselves be involved.

Such a substantial change would require aconsiderable increase in public employmentservices, the objective being for everyunemployed person to be monitored per.sonally by the same employment adviser.The job of the employment service wouldbecome more diversified but comprise threemain tasks: provision of information, jobplacement and support.

Contrary to popular opinion, such an over-haul of employment policy would not beprohibitively expensive. For example, it hasbeen calculated that the cost of triplingoperational expenditure on the publicemployment services in the countries of theUnion would mean an increase from 0.17to 0.5% of GNP. Spread over a period

three years, the corresponding expenditurewould be .almost entirely offset by the fall inunemployment, estimated at 100 000 in thefirst year, 400000 in the second year, and amillion in the third year.

Bringing the long-term unemployed -those who have been unemployed for morethan 12 months - back into employment isa difficult but not impossible task; this isdemonstrated by the success of initiatives inseveral countries aimed at creating a realroute back into employment for suchpeople. These initiatives should be general-ized, in cooperation with various associ-ations and the local authorities.

Finally, active employment policy shouldcross a new threshold in promoting youthemployment. Anyone who leaves the schoolsystem before the age of 18 withoutacquiring a meaningful vocational certifi-cate should be guaranteed a 'Youthstart' . Itis proposed that a scheme should be pro-gressively established at national levelwhich will give everyone access to a recog-nized form of training, whether or notaccompanied by employment experience.Moreover, at Community level

, '

European

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Union civilian voluntary service' could beintroduced, comprising a training elementand public utility work in another MemberState of the Union, to be financed by Euro-pean Social Fund pilot initiatives. Thisinitiative could back up the 'Youthstart'arrangements.

Dealing with new needs

Many needs are still waiting to be .satisfied.They correspond to changes in lifestylesthe transformation of family structures, theincrease in the number of working womenand the new aspirations of the elderly andof very old people. They also stem from theneed to repair damage to the environmentand to renovate the most disadvantagedurban areas.

Sources of new jobsLocal services

. Home help for the elderly and han-dicapped, health care, meal prepara-tion and housework;

. Minding pre-school-age childrenand schoolchildren before and afterschool, including taking them to andfrom school;

. Assistance to young people facingdifficulties, comprising help withschoolwork provision of leisurefacilities, especially sports, and sup-port for the most disadvantaged;

. Acting as caretaker for blocks offlats;

Provision of leisure and culturalfacilities, provided they are therebymade more accessible to all(adjusted opening hours lowerprices, travelling shows, art schoolsetc.

. Local shops kept in business in ruralareas, and also in outlying suburbanareas.

The objection will be voiced that if suchneeds exist, the market should rapidly pro-vide for them. In fact, the development ofboth the supply of and demand for suchnew services comes up against barriers:

. on the demand side there is the problemof price, already referred to in connec-tion with the costs of employment;

. on the supply side there is reticence totake jobs which are perceived .as beingdegrading, because they are oftensynonymous with domestic service andunskilled or selni-skilled work.

As a result, the development of the servicesin question is either left to the undeclaredemployment market, or is publicly funded,which is expensive. A new initiative couldstimulate both demand and supply, thuscreating a ' continuum' of possibilitiesranging from supply totally protected bypublic subsidies to totally competitive

Improvements in the quality of life

. Renovation of old housing with aview to increasing comfort (instal-lation of bathrooms and noise insu-lation) and safety;

. Development of local public trans-port services, which should be mademore comfortable, more frequent,accessible (to the handicapped) andsafe, and the provision of new ser-vices such as shared taxis in ruralareas.

Environmental protection

. Maintenance of natural areas andpublic areas (rubbish clearance,street cleaning, path clearance, etc.

. Water purification and the cleaning-up of polluted areas;

. Monitoring of quality standards;

Energy-saving equipment, particu-larly in housing.

supply. Thus a new 'social economy' wouldbe born, benefiting:

. on the demand side, from incentivessuch as income tax deductibility, or thelocal issuing of 'vouchers' along the linesof luncheon vouchers, issued instead ofproviding the social services normallyprovided by employers and local auth-orities, which can be exchanged for localservices ('service vouchers

. on the supply side, from traditional sub-sidies for the setting-up of undertakingswhich could be increased in cases wherea 'social employer' undertakes to employformerly unemployed people. Specifictraining would be provided to developthe skills needed for these new pro-fessions.

The scope for job creation dependslargely on the existing structures andservices in each country, lifestyles andtax rules.

However, several estimates agree thatsome three million new jobs could becreated in the Community, coveringlocal services, improvements in thequality of life and environmental pro-tection.

Call for actionThe analyses out in this document and thepossible solutions identified should guide ustowards a sustainable development modelboth from the viewpoint of the effectivenessof the triangular relationship growth-com-petitiveness-employment and as regards theenvironment and the improvement in thequality of life.

The effort to be made calls for adaptationsin behaviour and policies at all levels: theCommunity level, the national level, andthe local level. Since we are aware of thediffering situations in Member States, wedeemed it preferable not to formulate thepossible solutions in unduly concise terms.It will be for each Member State to takefrom the document the elements it regards

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as making a positive contribution to its ownaction.

Nevertheless, in the Commission s view, theindividual chapters of Part B should pro-vide the basis for work in the various spe-cialized meetings of the Council of Minis-ters. If conclusion along these lines werereached at the forthcoming EuropeanCouncil meeting, this would facilitate andactually set in motion the mobilization ofthe Community institutions in the pursuit ofthe objectives set.As for Community action proper, it is pro-posed to impart a new impetus or give anew form, but only in accordance with fivepriorities:

. Making the most of the single market;

. Supporting the development and adap-tation of small and medium-sized enter-prises;

. Pursing the social dialogue that has, todate, made for fruitful cooperation andjoint decision-making by the two sides ofindustry, thereby assisting the work ofthe Community;

. Creating the major European infrastruc-ture networks;

. Preparing forthwith and laying the foun-dations for the information society.

These last two priorities hold the key toenhanced competitiveness and will enableus to exploit technical progress in the inter-ests of employment and an improvement inliving conditions.

It needs to be stressed that the implementa-tion of these two priorities in no way calls

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into question the financial decisions takenas part of Package II by the EdinburghEuropean Council. There is, therefore, noneed to review the ceilings on resources.

Recourse to saving is the only other sourceof fmancing. It would be modest in magni-tude since the borrowings envisaged wouldaccount for less than 2% of total marketISSUes.

For the rest, what we are advocating is notonly economically indispensable but alsofinancially viable and hence carries no riskof adding to national public deficits.

Through these forward-looking measuresthe Community will lay the foundations forsound and lasting economic growth thebenefits of which will far outweigh the costof raising the funds required.

As a parallel development, and this is alsoone of the far-reaching changes made toour growth model, the new-found consist-ency between macroeconomic policy andan active employment policy will eliminateall the behavioural or structural rigiditiesthat are partly to blame for the underem-ployment with which we are having to con-tend. It will t4en be possible to satisfy thenumerous needs that have not yet been metas well as those to which the changes bothin the organization of our societies and inthe organization and sharing-out of workwill give rise.

The Commission thus calls on everyone toconduct a lucid analysis of our strengthsand weaknesses and to adapt behaviour tothe rapid changes taking place in todayworld, setting our sights .and focusing ourdetermination on what the future holds.

Development theme

Information networks

1. Why?

Throughout the world, production sys-tems, methods of organizing work andconsumption patterns are undergoingchanges which will have long-termeffects comparable with the first indus-trial revolution.

!his is ~he result of the development ofmformatlon and communications techno-logies. Digital technologies, in particularhave made it possible to combine transmission of information, sound text andimages in a single high-performance system.

The dawn of the multimedia world

This. will have far-reaching effects on pro-ductiOn st~ctures and methods. It will spellchang~s 1!l the way companies areorganiZed, m managers' responsibilities andin relations with workers. Small businesseswill benefit most. Working conditions willbe transformed by the greater flexibilitypossible with r~gard to working hours, theplace of work Itself (teleworking) and ine-vitably,. terms of contract and pay systems.Accordmg to some estimates, six millionAmericans already work at home. Newdata transmission systems will enable com-panies to globalize their activities andstrategies, forging forms of partnership andcooperation on a scale never possiblebefore.

~e change will also affect consump-tiOn patterns.

The need for physical mobility will bereduced by the availability of products andservices combining the advantages of mass

production with consumers' specific, andeven individual, requirements. A new farricher range of novel services in the fo~ofinformation, access to databases, audio-visual, cultural .and leisure facilities will beopened up to everyone. More specifically, itwill be possible to gain access to generalinformation directly, without any compli-cated technology, via a portable computerconnected, if need be, to a television set ortelephone.

The same phenomenon will affect us ascitizens.

I~ will he possible to make the services pro-vIded by the public authorities faster moreselective and less impersonal, prbvidedmeasl!res ar~ ta~en to. safeguard privacy.Certamservlces m which the public auth-orities have traditionally played a leadingrole (health, education, social security, etc.could be ~rovided far more widely, rapidlyand effectiVely. Market forces will be ableto playa greater part. Doctors, teachers andstudents will have instant access to vastdatabases.

This is not a technological dream forthe next century.

Some aspects of this new society arealready. be~ng put into place; many peopleare begmnmg to reap the benefit. Naturallythese changes will be led by the Triapowers first, but will gradually extend tothe rest of the planet. They will be dictatedabove all, by the needs of the users bothcompanies and consumers alike. Ind~stry isalready beginning to adapt to these newpn?spects. large-scale reorganizations are intram. They are making the traditional dis-tinctions, for example between electronicsinformation technology, telecommunications and the audiovisual sectors increas-inglr obsolete. They are blurring' the bor-derlines between the secondary and tertiary

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sectors, between industry and services. Theyare transforming the balance of power inindustry: the capitalization of Nintendothe video game maker, is already One thirdof IBM's and its turnover is almost twicethat of Microsoft, the leading software pro-ducer. This process has already started inthe USA, where it is giving birth to unpre-cedente~ partnerships and mergers betweencompames.

It will gain ground in Europe. It is forcingthe public authorities to review the regula-tory framework.

Concern has been expresed aboutemployment, but it is difficult to assessthis factor precisely.

Rapid dissemination of new informationtechnologies can certainly speed up thetransfer of certain manufacturing activitiesto countries with distinctly lower labourcosts.

However, the productivity improve-ments which these technologies willallow throughout industry will also savelarge numbers of jobs which wouldotherwise have been lost.

Weare withnessing rationalization of theservice sector. However, the enormouspotential for new services relating to pro-duction, consumption, culture and leisureacitivities will create large numbers of newjobs.For example, the services generated byMinitel in France have created more than350000 jobs. The foreseeable growth in thenumber of audiovisual services will con-siderably increase the demand for new pro-grammes. By the turn of the century thereshould be 10 times as many television chan-nels as now and three times the number ofsubscribers to cable networks.In any event, it would be fruitless tobecome embroiled in a fresh dispute aboutthe 'machine age , as was the case with thefirst industrial revolution. Worldwide dis-semination of new technologies is inevit-able.

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The aim must be not to slow down thischange but, instead, to control it inorder to avoid the dramas whichmarked the adjustments in the last cen-tury but would be unacceptable today.

Above all, these changes have been broughtabout by market pressure and companiesown initiative. The government decisionstaken in the USA and Japan aim at orga-nizing and speeding up the process, by sup-porting companies' efforts. The emphasishas been on establishment of the basicinfrastructure and support for new applica-tions and technological development. TheUS programme to establish the 'NationalInformation Infrastructure' provides for atotal investment of x times the spending Onthe Apollo programme.

It is in Europe s interests to meet thischallenge since the first economieswhich successfully complete thischange, in goods conditions, will holdsignificant competitive advantages.

Compared with its leading competitorsEurope holds .comparative advantages fromthe cultural, social technological andindustrial points of view. Since 1 January1993 its market has been largely integratedalthough too many monopolies and toomuch overregulation persist. Interoper-ability has not yet been achieved.

Already, the States which have taken thelead with deregulation have the fastestgrowing markets and falling consumerprices.

Europe s main handicaps are the frag-mentation of the various markets andthe lack of major interoperable links.To overcome them, it is necessary tomoblize resources and channel endeav-ours at European level in a partnershipbetween the public and private sectors.

2. How?The action plan is based on five priorities:

Priority

1. Promote the use of informationtechnologies

2. Provide basic trans-European ser-vices

3. Create an appropriate regulatoryframework

4. Develop training on new techno-logies

5. Improve industrial and techno-logical performance

Means

launch European projects On applicationsand public services (transport, healthtraining, education and civil protection)and strengthen cooperation betweenadministrations (IDA programme)promote teleworkingensure closer involvement of users in thedrafting and implementation of technologypolicies

develop the basic networks (ISDN andbroadband)ensure network interoperabilityensure closer coordination between tele-communications policies and aid from theStructural Funds

end distortions of competitionguarantee a universal servicespeed up standardizationprotect privacy and ensure the security ofinformation and communication systemsextend intellectual property law

encourage acquisition of the basic knowl-edge required in order to use new techno-logies and exploit their potentialensure widespread use of new technologiesin teaching and trainingadapt the training for engineers and resear-chers

increase the RTD effort and adapt it to thenew market conditions (fourth frameworkprogramme)promote industry and technology watchtake up the results of RTD in industrialapplicationsnegotiate equitable conditions of access tothe competitive market at world level

The keys to the success of this plan are todefine the measures clearly, to specify atimetable and to put in place the resources.

It is proposed that a task force on Euro-pean information infrastructures be estab-lished with a direct mandate from the Euro-

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pean Council. This task force will have thejob of establishing priorities, deciding onprocedures and deeming the resourcesrequired. It should report to the Presidentof the European Council by 31 March 1994so that the plan can be put into action bymid-1994 after consultation with the partiesconcerned and the approval of the Euro-pean Council.

3. Which networks?The transport network has motorways withseveral lanes, and access roads and serviceareas allowing motorists to drive whereverthey choose.

The communications network will alsohave:. highways along which information will

move: these will be the broadbandoptical fibre networksaccess roads and service areas: these willbe the services (disks, files, databaseselectronic mail services and host com-puters);

. highway users who will choose applica-tions for their work or private life.

Europe s telephone networks are alreadyinternational, but the digital networks forcarrying information in the form of textdata or images are mainly being developedon a purely national basis.

In order to provide greater access to a

wide range of interactive services andcreate a common information areaaction must be taken:. to ensure coordinated project man-

agement;. to interconnect the various networks

and make them interoperable;. to invest and innovate in order to

provide a wide range of informationin the shortest possible time.

Such an approach is essential to stimulatethe creation of new markets. New projectsmust be undertaken rapidly and resolutely

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in order to break the vicious circle perpetu-ated by the weaknesses on both the demandand supply sides.

To this .end, the eight strategic projectslisted in the Annex are proposed.

They cover infrastructure, services andapplications alike.

Establishment of a high-speed com-munication network

This infrastructure is necessary for thedevelopment of multimedia services. Itwould use the most advanced data trans-mission technologies (optical fibre) andfully capitalize on the digitization and high-speed transfer of information (high defini-tion, interactive and multifunction systems).

This would extend the integrated servicesdigital networks to be establishedthroughout the Community by the year2000.

Initiation of three programmes todevelop electronic services

These services are necessary for diversifica-tion of the applications on a given infra-structure network:

Electronic images: interactive video ser-vices will revolutionize workingmethods, training and leisure activities.The objective is to ensure Europe-wideinteroperability of these new d fa carte

services by 1997.

Electronic access to information: this willentail bringing together information(administrative, scientific cultural orother data) in databases to which allusers in the Community should haveaccess.

Electronic mail: the various commercialelectronic document transmission ser-vices must be made interoperable; devel-opment of this service is particularlyimportant to make small firms morecompetitive.

Promotion of four priority applications:teleworking, teletraining, telemedicineand links between administrations.

. Teleworking: Projects are already underway in the Member States. The Com-munity would support pilot programmeson the establishment of a transfrontiernetwork for the management of humanresources.

Teletraining: The objective is to establisha network linking more than 100 univer-sities or colleges by 1996 and givingthem all access to common trainingmodules.

. Telemedicine: By the year 2000multimedia links are to be establishedbetween the main cancer research cen-tres, bone marrow banks and socialsecurity centres.

. Links between administrations: To ensuresmooth operation of the internal market(taxation, customs, statistics), it is essen-tial to improve the interchange of databetween administrations and to providecompanies and the public with easieraccess to this information.

4. What decisions?At the moment, the Council of Ministersand the European Parliament are conti-nuing their discussions on the developmentof data communications (IDA) networks.In the autunm the Commission submittedtwo proposals on telecommunications net.works containing a series of guidelines(master plan) on the integrated services dig-ital network (ISDN) and broadband net-works.The biggest difficulty encountered in thediscussions concerns the content of thework: some Member States feel that itshould cover the infrastructure only butmost think that it should cover not only theinfrastructure but also the associated ser-vices.

5. Financing options?

The estimated funding needed over the next10 years will be ECU 150 billion. SomeECU 67 billion will be needed between1994 and 1999 for the priority projectsselected. They will be covered mainly byprivate investors. Financial support fromthe national and Community authoritieswill playa marginal role to provide an icen-five, as with other networks.The Community could provide ECU 5 bil-lion over the entire period from its budgetfor networks, from the Structural Fundsand, in particular, from the research pro-gramme. This could be supplemented byEIB loans and European Investment Fundguarantees and the new fmancial mech-anisms described in the Annex.

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Trans-European telecommunications networks:

Information highways Target area for Investment requiredStrategic Projects 1994- 1999

(billion ecus)

Interconnected advanced establishment ofnetworks high-speed

communication networkconsolidation ofintegrated services digitalnetwork

General electromc electronic acces to

servIces informationelectronic mailelectronic images:interactive video services

Telematic applications teleworkinglinks betweenadministrationsteletralllingtelemedicine

Total

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Development theme

Trans-European transport andenergy networks

1. Why?

Europe s ascendancy in the past was due tothe quality of its communications networkswhich gave its inhabitants easy access tonatural and technical resources. By devel-oping the movement of people and good~,Europe has been able to marry econo~lcprosperity, quality of life and comme~Clalefficiency; it has also been able to remam atthe forefront of technology and to backhighly successful industry, Airbus being agood example. Our transport, energy an~telecommunications systems are clear eVl.dence of this tradition.

We need to continue along this road, toenter a new phase and to visualize otherfrontiers in the light of the globalization ofmarkets, the growing mobility of capitaland technology and the investment needswhich are becoming apparent in the Eastand the South. The development of trans-European transport, telecommunicationsand energy infrastructure neworks answers

Promoting new or better designedinfrastructures, accessible to all citizens,will permit:

faster safer travel at lower cost, andthus ' an increase in trade, whilereducing costs and distances andcreating scope for other activities;effective planning in Europe inorder to stem the emergence ofserious socio-economic disequilibriain all Member States;

. bridge-building towards EasternEurope, which is essential in order tomeet the immense investmentrequirement resulting from the stateof decay of communications and toorganize the necessary economiccomplementarities.

this need which all the Member Statesemphasized in their contributions.This is also a chance to:

. give our industries the opportunity ofengaging in promising medium- andlong-term projects and of developingnew products;

. seek the optimum combination ofexisting transport modes (multimo-dality) in order to enhance performanceand ~t the same time reduce theirenvironmental impact.

Making traffic faster, safer and moreenvironmentally compatible facili.tating and boosting trade, and bringingMember States closer to their easternand southern neighbours would heraldthe advent of the European Union.

These networks are the complement to thesingle market. After the huge collectiveeffort made to eliminate frontiers betweenthe Member States, it is now necessary toincrease physical links, including those withthe most distant countries. This is also a keyfactor in competitiveness, minimizing coststo businesses and private individuals, andoptimizing existing capacities by improvingtheir compatibility.

2. Why now?

Our investment in infrastructures hasbeen slowing down over the last years.

This is particularly true of transport; theresult is rigidities, procedural slowness andmalfunctions, which are blamed by econ-omic circles as being one of the main causesof the current decline in competitiveness.This can now be remedied with the aid ofthe new provisions of the Treaty on Euro-pean Union (Article 129).

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The fact that not enough attention hasbeen paid to developing infrastructuresis one of the reasons for the deteriora-tion in the quality of life.

Time wasted because of traffic congestionunder-utilization of the new communica-tions media, environmental damage owingto the failure to use the most efficient tech-nology are all to some extent contributoryfactors in the present malaise of our citiesand the resulting social discord. The same istrue of the thinly-populated rural areaswhose isolation is a threat to their veryexistence.

The rapid progress made in data pro-cessing, environmental engineering, propul-sion methods and new materials completelychange the outlook. We are living with sep-arate, compartmentalized networks, withmeans of transport which are oftenenvironmentally damaging. It will hence-forth be possible to combine different trans-port modes, to use electronics to organizelinks and traffic better, to connect networksin all sectors for which different nationalauthorities are responsible and to integratestringent environmental standards in infra-structure projects. A wholly new generationof projects is emerging, and a completelydifferent development logic.

Countries such as the USA and Japan aremaking significant targeted efforts torenew their infrastructures. New industrialpowers such as Singapore, Taiwan, certainparts of China and Argentina are creatingnetworks which integrate the latest techno-logical advances.

By focusing the necessary resources ontrans-European projects, we shall main-tain our capacity to compete with therest of the world and improve thequality of life in Europe.

Equally, it is inconceivable that we shoulddevelop an economic partnership with thecountries of Central Europe and Russia as

preliminary to a deeper association

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without, at the same time, embarking onbold infrastructure projects. The two arecomplementary.

Finally, potentialinvestroents by theend of the century, which are put atmore than ECU 250 billion, are a keyfactor in the economic recovery ofEurope.

3. How?

Article 129 of the Treaty on EuropeanUnion spells out the Community' s tasksand instruments relating to the estab-lishment of networks.

Within the framework of a system of openand competitive markets, action by theCommunity shall aim at promoting theinterconnection and interoperability of net-works as well as access to such networks. Itshall take account in particular of the needto link island, landlocked and peripheralregions with the central regions of the Com-munity (Article 129b).It shall establish series of guidelinescovering the objectives, priorities and broadlines of measures (master plans); thesegui-delines shall identify projects of commoninterest; it shall support the fmancial effortsmade by the Member States for the projectsidentified, particularly through feasibilitystudies, loan guarantees or interest ratessubsidies; it may also help coordinate thepolicies pursued by the Member States andcooperate with third countries (ArticleI 29c).

The European Parliament and the Councilof Ministers decide on the guidelines andprojects of common interest by qualifiedmajority; Member States must approve theguidelines and projects that COncern theirterritory.

The Community has two tasks:

. encourage private investors to take agreater part in projects of Europeaninterest;

. reduce, to this end, the financial oradministrative risks involved.

It is therefore recommended that priorityshould be given to projects of Communityinterest, the financial and administrativearrangements for which have been well pre-pared, and for which environmental impactassessments have been carried out.Project evaluation will concern the fman.cial risks, the possible sources of financing,the legal status (duration of concessions),management and the environmentalimpact.

An administrative and fmancal actionplan will be drawn up for each projectin order to guarantee investors the nec-essary predictability and stability.

4. Where are we now?a) Transport

The plan for high-speed trains had alreadybeen accepted by the Council in 1990, andit will be updated in 1994 for integration ina multimodal perspective.On 29 October 1993 the Council and theEuropean Parliament approved threemaster plans on:

. combined transport, with work in twostages of 6 and 12 years;roads, with 55 000 km of trans-Europeanlinks including 12 000 km of motorwayto be built in 10 years;

inland waterways, with the establishmentof an interoperable network in 10 years.

Three other plans will be presented in 1994on:

. the conventional rail infrastructure, with aview to integrating lines for passengertraffic (regional, urban) and freight inthe intermodal network and to extendinglinks towards Central and EasternEurope;

. the airport infrastructure, with a view toimproving the linking-in of the Com-munity network internationally and of

advancing the opening-up of certainregions of the Community;

. seaports, with a view to promoting intra-Community trade and trade with the restof the world and relieving congestion certain inland links, with beneficialenvironmental effects.

b) Energymaster plan and projects of common

interest for electricity and gas will be pre.sented at the beginning of 1994.

5. What are the priorities?The projects will focus above all on thetrans- European transport network. This isthe sector which will require the most sub-stantial investment, and where the gap bet.ween available financial resources andneeds is biggest. The aim is to develop atruly multimodal strategy, which is essentialin order to imprpve the efficiency of theeconomy and the quality of life.

It is proposed that major priority pro-jects of Community interest should beselected on the basis of the master plansalready approved, in order to bring allthe countries of the European continentcloser together. These concern:. new strategic transfrontier links

(Brenner rail link, Lyons-Turin raillink, Paris-Barcelona-Madrid raillink, Berlin-Warsaw-Moscow motor-way link);

. improving connections between thevarious transport modes (Heathrow-London-Channel Tunnel link);

. improving interoperability and effi-ciency of networks by installingtraffic management systems (air, sealand) and thus significantly reducingnuisance factors.

The development of energy networksreflects two priorities: the reduction of costsby making better use of existing capacitiesand enhancing security of supply. The rustpriority is more particularly concerned withelectricity, while the second applies to gas.

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This will permit more rational overall use ofthe available energy throughout the wholeEuropean continent.As far as electricity is concerned, the objec-tive is essentially to increase interconnec-tion of networks and thus avoid theirsatu-ration in some cases and, in others, providea better service to the more remote areas.

Making better use of existing electricitycapacities will help protect the environ-ment.

With regard to gas, Europe must come toterms with growing consumption which willincreasingly by covered by imports fromthe North Sea, Algeria or Russia.

It is essential, in the interests of econ-omic security, to speed up constructionof trans-European gas pipelinescapable of guaranteeing supplies andcreating avenues for long.term cooper-ation with the producer countries.

Eight major programmes will shortly beproposed to the Council with this in mind.the success of all these projects is closelylinked with the deepening of the internalmarket.

6. Financing optionsThe financial requirements for the next year can be put at more than ECU 400 bil-lion; by the end of the century alone, theywill probably amount to ECU 250 billion(ECU 220 billion for transport and ECU 30billion for energy).

The total investment involved for the pro-posed projects amounts to ECU 82 billion

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for transport and ECU 13 billion forenergy.

The purpose of the above assessment is tocreate the best possible conditions for fin-ancing by the market in the framework of apublic- and private-sector partnership.

Financing is based on three principles:financial equilibrium: this can to alarge extent be ensured by privateinvestors;compatibility with public finances:any contributions from MemberStates will respect the guidelinesrelating to the public debt;subsidiarity: the Community willsupport feasibility studies, provideloan guarantiees or promote theclosing of missing links in the frame.work of projects of common interest.

With regard to the 26 transport projectsalready examined in the framework of themaster plans (23) or in other Council bodies(3), the Community has already financedfeasibility studies and work to the tune ECU 332 million.It could provide almost ECU IS billionover the period 1994-99 from its variousinstrument, 1 which would be added to loansof an equivalent amount (growth initiativefacilities).The eight major energy programmes willrequire ECU 13 billion, of which 10 mustbe provided by the market. The Com-munity could provide ECU 1.2 billion overthat period through the structural policiesand the instruments for interest-rate sub-sidies and financing of feasibility studies.Under these conditions, the Member Statescontribution will be marginal.

Annex

Investing in thecompetitiveness of EuropeThe trans-European networks are an essen-tial element for the competitiveness of theEuropean economy and the smooth func-tioning of the single market.

1. Transport and energy networks ECU 250 billion by the year 2000

These networks of transport infrastructureswill enable our citizens to travel morequickly, more safely and more cheaply.They will also form a link to easternEurope and to north Mrica. In total someECU 400 billion of investments in thetransport and energy trans-European net-works will be required in the next 15 yearsof which some ECU 220 billion by 1999.Article 129b of the Treaty makes clear howto proceed. The Community! establishes aset of guidelines that identify projects ofcommon interest. It then supports the fman-cial efforts of the Member States (feasibilitystudies, loan guarantees, or interest ratesubsidies). It can also contribute to thecoordination of the Member States' policiesand cooperate with third countries.The principal guideline networks (schemasdirecteurs) have been proposed by the Com-mission or adopted by the Council and theParliament. The Commission has identifieda series of priority projects for the next fiveyears (25 transport projects amounting toECU 83 billion and 10 energy projectscosting ECU 13 billion) covering the Com-munity, but also extending to centralEurope and north Mrica (energy).

2. Telecommunications - ECU 150billion by the year 2000

A system of information highways for theCommunity will allow the best means to

I The Council decides by qualified majority in co-deci-sion with the European Parliament (Article l89b);guidelines and projects of common interest whichrelate to the territory of a Member State require theapproval of the Member State concerned.

create, manage, access and transfer infor-mation. It involves:

. the creation of infrastructures (cable andland or satellite-based radio communica-tion), including integrated digital net-works ;

. the development of services (electronicimages, databases, electronic mail);

. promoting applications (teleworking,teletraining, telemedecine and linkedadministrations).

The amount of investments that could beput into effect by the end of the century hasbeen estimated at ECU 150 billion.

3. Environment - ECU 174 billion onlarge environmental projects bythe year 2000

The environment is an integral element ofthe trans-European networks, for exampleconcerning combined transport networksdesigned to get traffic off the roads ontorail. The Commission has neverthelessenvironmental programmes of sufficientsize to merit eligibility for financial supportfrom the Community. These concern urbanwaste water treatment and renovation ofwater .supply distribution systems at an esti-mated cost of ECU 280 billion in total over12 years or ECU 140 billion by the end the century. The Community could helpfmance some ECU 25 billion in this area ofenvironmental concern over the periodI 994-99.

4. Financing the trans-Europeannetworks and large environmentalprojects

The major portion of frnance for theseinvestments will be raised at the level of theMember State, either through private inves-tors (especially in the telecoms sector) or viapublic enterprises. The Community canhowever, playa role, as foreseen in theTreaty, by supporting the financial efforts

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of the Member States and mobilizing pri-vate capital I . This requires a panoply offinancial instruments, as set out in the tablebelow, some of which exist already and twoof which are new ('Union Bonds

, '

Convert-ibles ). The new instruments are needed forprojects specifically included in the MasterPlans and complement the lending of theEuropean Investment Bank, which is moregeneral. The budgetary elements remain

1 In addition the ElF can guarantee up to a total ofECU 6 billion of private loans for large infrastruc-ture projects, averaging 1 billion per year to 1999.

within the Edinburgh ceilings. Nationalbudgets would not be required to supportadditional flllancing. In the case of thenew instruments, the capital and interestwould be repaid by the promoters of theprojects, with the Community budgetavailable to back the repayment of theUnion Bonds and the capital of the Euro-pean Investment Fund available in thecase of the Convertibles. There would beno risk of destabilizing the capital marketsgiven that the amounts concerned rep-resent less than I % of the Eurobond andbank credit markets.

Community financing of the trans-European networks

(average financing per year 1994-99)

Source:Community budget:of which:TENsStructural Funds:

Cohesion Fund:

R&D:

Amount in billion reus

(TENs):(environment):

1.35

(TENs):(environment):

1.151.15

(telecommunications) :(transport):

1.0

Em (loans);Union Bonds I (esp. transport and energy):Convertibles I guaranteed by ElF (esp. telecoms):

1 See box.

Total 20.

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New facilities

Union BondsUnion Bonds' for growth would be issued on tap by the Union for long maturities to

promote major infrastructure projects of strategic interest covering the trans-Europeannetworks plus cross-border projects with EFTA, Central and Eastern Europe and NorthAfrica. The beneficiaries would be project promoters (public sector agencies, privatecompanies) directly involved in TENs. The EIB would be invited to appraise andadvise the Commission On the overall structure of the fmancial arrangement and act asagent for individual loan contracts.

Convertibles guaranteed by the European Investment FundBonds issued for long maturities by the private or public company promoting the pro-ject, guaranteed by the European Investment Fund. These would be either:

convertible wholly or partly into shares or investment certificates; or. by accompanied by subscription warrants giving the holder a right to buy shares at a

certain price; or. performance-related through a share in the profits of the company or venture con-

cerned.

The maturities of the bonds and of the exchange terms would be coherent between theexpected returns of the project and the exercise period of the option. The ElF wouldcreate a special window for this type of guarantee, especially for major projects linkedto telecommunications networks.

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ARTB

The conditions of growth,co.mpetitiveness and more jobs

(Preparatory work)

- GROWTH

Chapter The macroeconomicframeworkCommunity unemployment has increasedsteadily since the beginning of the 1970swith the exception of the second half of the1980s, when nine million jobs were createdthrough a combination of appropriatenational policies, a favourable .externalenvironment and the dynamism resultingfrom the prospect of the single market.Overall, however, since the early I 970sdemographic factors have led to an increasein the number of people seeking jobs, whilethe number of jobs available stagnated orincreased only modestly. Other developedeconomies have been patently more suc-cessful in responding to the challenge ofincreasing job creation.The causes of the Community s poorrelative performance in this area arenumerous and deep-seated. The mostimportant ones can be summed up underthe headings of a suboptimal macroecon-omic management of the economy and ofan insufficient effort of adaptation to thechanges which have taken place in thestructure of the Community s economy andin its international environment. The 1980ssaw a change of policy orientation. Theemphasis shifted towards creating morestable macroeconomic conditions andtowards easing the pain associated withstructural change rather than slowing itdown. This reorientation brought positiveresults in the second half of the decadeproviding good growth but not enough newjobs. In 1992-93, however, there was a lossof confidence brought on in part by actionsoutside the economic sphere. This and othererrors put the economy into its worst reces.sion.

To the extent that the present problems arethe result of inadequate policies in the moreor less recent past, there is nothing inevitablein this state of affairs.

In addition, there is a number of factorswhich are favourable to a rapid return sustained growth and which can and should

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be exploited. The Community's achieve-ment in creating the world's biggest singlemarket is a major asset on which it will bepossible to build once the recovery sets in.The recession, painful as it is, has speededup the process of adaptation of firms to thenew environment.

The world economy has continued to growover recent years and a number of devel-oping countries have experienced very highrates of growth. The presence of newvibrant economies in Asia and, soon, inEastern Europe constitutes a huge oppor-tunity and not a threat to our standard ofliving. These countries will be 'buying onworld markets as much as they will earnwith their exports. The rest of the world isnow experiencing again positive rates ofgrowth of between 2 and 3% while worldtrade outside the Community is expandingby 5 to 6% in real terms. Finally, the priceof oil is now back to the low levels recordedin the mid- 1980s.

Over recent years, comprehensive analyseshave been made. They show that there is nomiracle remedy, but they point to the exist-ence of a wide range of measures to helpgrowth, competitiveness and employment.The challenge is now to appreciate the orderof magnitude of the likely effects of thevarious measures, to determine their appro-priate mix and to implement the preferredstrategy with determination. This will not beeasy. The factors which have hindered in thepast the implementation of the right policiesare largely still present. Attacking thesources of the present unemployment prob-lems requires, therefore, a clean break withthe past. This will only be possible if a largeconsensus on the necessary course of actionto be followed can be developed: withineach country, between management and thelabour force in industry and among themembers of the European Community.

This chapter outlines the macroeconomicframework which policies must create andwithin which the structural interventionsoutlined in the following chapters will bemost successful.

1. Views of the Member StatesIn their contributions to the White Paperthe Member States broadly agree On theassessment made. They shall call for a clearanalysis of the serious economic situationwith a view to enlisting the help of all thoseinvolved in the economic process in findingremedies requiring sacrifices that have to beshared fairly.

The problems of employment and competi-tiveness about which governments, theEuropean Council, employers and tradeunions have all expressed serious concern

are the result of developments whichhave been witnessed for a number of yearsbut do not appear